The rapid acceleration of change has challenged many of our established decision-making rules. Here are some issues that should encourage you to reconsider some basics of your decision making:
- Analytics and A.I.: Significant issues with Analytics occur when intuition, risk, and low probabilities produce better results. We all know the lottery is a bad bet, but some people do win. Similarly, many billionaires like Gates, Bezos, Jobs, and Must have achieved fame by pursuing high-risk and out-of-the-box alternatives. Many analytical recommendations encourage the “most likely” rather than the best alternatives.
- Social Changes: Women and minorities have not always been treated with dignity as consumers. Similarly, about 18 million or about 70% of the population growth will be over 65 years old between 2015 and 2025.The Hispanic population has grown from 3% to 10% of the population.
- The Internet of Things: The internet and its usage especially among younger people will continue to explode. Nearly every consumer-based market is dominated by businesses that are capitalizing on the internet of things like Amazon and Google. Services like Uber, Air B&B, Amazon, and thousands of other businesses are disrupting their individual markets.
Here are some suggestions to consider to deal with change in our current environment:
Know Your Goal and Set Limits
For me, playing cards is problematic because, if the stakes are low, I play more daringly and end up losing quickly. If the stakes are high, I worry too much about losing and don’t bet.
If my goal is to have fun, I’ve learned that the best strategy is to set a monetary limit so I can enjoy myself without worrying about excessive loss. Different approaches will work for different goals. For example, in craps there are some back bets that are at even odds.
Evaluate The Risk
What and how much is really at stake? If a lottery ticket costs $20 and the two potential outcomes are to lose $20 or win $2 million, is that risk worth it? For some, yes. But not every risk is right for everyone.
What exactly is on the line and how much can you afford to lose? Weigh the pros and cons. For example, buying lottery tickets, gambling, and staying at a cheap hotel are all things that have a low probability of “winning.” However, they are affordable and the rewards are often high.
In contrast, using all of your funds on risky investments, not buying insurance, or driving somewhere without directions are all risks that have the potential for significant loss and marginal benefits.
Understand The Odds and Probability
Do you really, truly, and completely understand all the aspects of the risk? The probability of reward, the amount of the reward, and the value of the reward? Do you know what you’re going up against and what it would take to recover the potential loss?
Consider recommendations to increase probability of success:
Have a backup plan.
Research everything: cost, odds, competition, value, risk, and alternative strategies.
Know your strengths and play to them.
Test and analyze results so you can adjust accordingly.
Adapt and be flexible. Most efforts won’t succeed on the first try, but practice integrating the positive components from each trial with some different approaches.
The reality is that outliers create much of the innovation, excitement, and change in our society. Steve Jobs probably said it best: “The people who are crazy enough to think they can change the world are the ones who do.”
In their new book, Noise, Daniel Kahneman, Olivier Simony, and Cass Sunstein point out how Analytics can fail to include key metrics. For example, mood, bias, mental state, etc. can alter judicial decisions. Variables like hunger, how much sleep we got, and personal preferences can all affect decisions.
Understand diversity. Demographics are affected by age, location, socioeconomic status, race, gender, etc. Current events have certainly affected trends relating to racial and female groups. Staying up-to-date on your target consumer and their habits will help inform your decisions. Do you know who your customers are and what demographics they belong to?
The biggest problem with decision-making is bias. Whether we admit it or not, we all have biases. Analysists love to discuss mathematical formulas and measurement in affecting bias; however, most bias (especially in small businesses) is simply human. For example, our most recent experience can have a significant impact on decisions.
Better decision making can accelerate efforts to manage change. In particular if we consider causes and factors affecting decisions, we can better deal with the process. In particular parameters, bias, risk and goals must be included in your processes.